Inequalities in the (De‐)Commodification of Labour: Immigration,the Nation State,and Labour Market Stratification

In an era when globalization has supposedly challenged the ability of the nation state to manage economic affairs, I shall argue that the state not only still matters but that it also plays a major role in processes of labour market stratification for migrant workers. Using the organizing concepts of commodification and de‐commodification I review the growing comparative literature on government policies for economic migration to show how skill‐based admissions policies, restrictions on freedom of employment, as well as differential access to social rights and citizenship generate durable forms of categorical inequality. What is perhaps unique about economic immigration is that these inequalities are underpinned by legislation and, in the case of the highly skilled, requirements for formal certification. The paper concludes by calling for further research within this rapidly growing field to explain how these complex patterns of inequality have emerged and whether they extend beyond the small number of cases that have been examined repeatedly in the existing literature.     

Inequality, unemployment and growth: New measures for old controversies

This essay surveys some of the work of the University of Texas Inequality Project, a small research group that for the past decade has worked primarily to develop new measures of economic inequality, using a method based on the between-groups component of Theil’s T statistic. In this way, inequality statistics can be computed from many diverse and mundane sources of information, including regional tax collections, employment and earnings, census of manufacturing, and harmonized international industrial data sets. The rich data environment so constructed permits new analyses of patterns of economic change, by region, by sector, and by country, and broadly supports the idea that the movement of inequality is closely related to macroeconomic events at the national and the global level. I thank Ravi Kanbur for the invitation to submit this essay for consideration by the JOEI, and I thank the members of the UTIP team for comments on the draft.     

A note on minimally progressive taxation and absolute income inequality

The Lorenz curve of income after tax is known to dominate the one before tax for all given pre-tax income distributions, if, and only if, average tax liability is increasing with income (Jakobsson 1976; Eichhorn et al. 1984). It is shown in this note that the absolute inequality of incomes (Kolm 1976) is unambiguously reduced by taxation if, and only if, tax liability is increasing with income.It is a pleasure to acknowledge the intellectual debt I owe to W. Eichhorn, H. Funke, and W. F. Richter whose result on progressive taxation and income inequality stimulated the present research. I am grateful to an anonymous referee whose comments on an earlier draft improved the paper.     

Getting Serious About Inequality

Sociologists have spent a great deal of energy studying social inequality, but in this presentation I suggest that we need to refocus our efforts a bit. I examine four popular myths among the general public, and among some in sociology, regarding the drivers of extreme inequality: (1) that most inequality is generated by race and gender, (2) that most inequality is driven by educational inequality, (3) that most inequality is driven by differences in family structure, and (4) that most inequality results from face‐to‐face interactions. I provide preliminary evidence that our explanations need some work. That work involves recognizing that most inequality is generated within demographic groups and that this inequality is growing rapidly. It also involves recognizing that there are few ways to incorporate underrepresented groups into the mainstream of a social and economic system where extreme inequality is getting worse and substantial percentages of the population face economic stagnation and downward mobility. The conclusion represents a call to focus on the most important group gap—the widening gap between the wealthy and the poor—and the mechanisms through which most people gain access to economic goods, services, and social respect—jobs and money.     

Negotiating Unequal Exchange: Relational Work in Cross-Class Sibling Relationships1

Based on 60 in-depth, semi-structured interviews, this article examines exchanges of support in cross-class adult sibling relationships. Whereas previous studies of family exchange have largely focused on parent–child support and patterns of inequality across families, this study addresses a gap in the literature by focusing on sibling exchanges and within-family inequality. How is support exchanged when expectations of peer equality are violated—when there is an economic difference between adult siblings? I find that cross-class siblings engage in relational work to shape and reframe exchanges in ways that are more indirect, often involving third parties. I identify four types of indirect economic support—proxy support, dependent support, compensatory support, and shared resources—which contribute to our understanding of the dynamics of sibling exchange, and point to ways in which inequality can be interactionally managed.     

Crossing the finish line? A review of college completion inequality in the United States by race and class

Although most students graduate from high school and enroll in college the following fall, rates of entry into higher education and completion of a bachelor's degree continue to be stratified by race and class. Because of the potential returns that accrue to individuals and society overall when students complete their 4‐year degree, these disparate trends should motivate more policy‐relevant research in this area. In this review, I show how a longitudinal perspective of the path to a BA degree helps to reconcile competing theories of college completion by race and class across disciplinary boundaries. Both human capital theory and status attainment theory largely examine college completion as the long‐term process of BA attainment, although they differ in their focal stages and mechanisms. In contrast, the theory of categorical inequality, as applied in this review, focuses on the years in higher education and describes the ways in which colleges and universities as organizations create, legitimate, and reinforce categorical distinctions in postsecondary schooling and how these processes independently shape college completion inequality. As public interest grows in holding colleges accountable for their graduation rates, more research is needed on how the formal and informal organizational policies and practices of colleges produce inequality.     

Does philanthropy reduce inequality?

Wealthy individuals often voluntarily provide public goods that the poor also consume. We show that, rather than reducing it, such philanthropy may aggravate absolute inequality in welfare achievement, while leaving the change in relative inequality ambiguous. Additionally, philanthropic preferences may increase the effectiveness of policies to redistribute income, instead of weakening them. Our results thus suggest that philanthropy and direct redistribution may often be better viewed as complements, rather than substitutes, in the context of inequality reduction. In so doing, they also bring into question the general normative case for large tax deductions for charitable contributions.     

The Case of Cubans: Racial Inequality in U.S. Homeownership and Home Values

Prior research finds that human capital may explain racial housing inequality, whereas others note the historical role that race played in creating unequal housing conditions. This study uses the case of Cubans in the United States to examine whether human capital explains Black–White housing inequalities, or if they are a result of nativity/cohort differences—a proxy for the federal policies that supported Cubans’ economic and social incorporation. Using pooled data from the American Community Survey, I examine how human capital characteristics and nativity/migration cohorts shape odds of homeownership and predicted home values among Cubans. Extended analyses using decomposition methods find that although human capital characteristics are important, they play a smaller role in explaining Black–White differences in homeownership and home values. Indicative of the changing structure of racial stratification in the United States, results reveal substantial inequality among the oldest of Cuban immigrants and U.S.‐born Cubans, despite a trend toward declining inequality among recent arrivals. Supported by the literature of systemic racism, the case of Cubans shows how human capital explanations do not sufficiently explain racial housing inequalities and how the future of racial stratification is one of inter‐ and intra‐ethnic group inequality.     

THE GREAT OVERESTIMATION: TAX DATA AND INEQUALITY MEASUREMENTS IN THE UNITED STATES, 1913–1943

Historical measures of income inequality in the United States must grapple with the challenge of data quality. We examine one such problem affecting the well-known estimates of income inequality produced by Piketty and Saez (2003) using the records of the Internal Revenue Service (IRS). Prior to 1943, incomes were self-reported. Combined with lax enforcement on the part of the IRS, self-reporting of incomes could provide a misleading portrait of the income distribution. To test the accuracy of IRS records, we compare them to independently tabulated state income tax returns between 1919 and 1945 from states with more comprehensive and rigorously enforced tax collection procedures. State income tax records show lower overall levels of income inequality than IRS records. However, we still find that top income concentrations declined across the period between 1929 and World War II. These findings attest to the sensitivity of distributional estimation to the reporting selectivity and economic quality of underlying tax data, suggesting that the existing IRS-derived series systematically overstates top-income concentration in the interwar period. (JEL H2, N32, D31, E01)     

INEQUALITY AND GROWTH IN THE UNITED STATES: WHY PHYSICAL AND HUMAN CAPITAL MATTER

We investigate the relationship between economic growth and top income inequality under the influence of human and physical capital accumulation, using an annual panel of U.S. state‐level data. Our analysis is based upon the “unified” framework offered by Galor and Moav (2004) while the empirics account for cross‐section dependence, parameter heterogeneity, and endogeneity, in nonstationary series. We conclude that changes in inequality do not influence growth, neither in the short run nor in the long run in the United States as a whole in the 1929–2013 period. Our findings are robust to the inclusion of overall income inequality measures. These findings provide support for the theoretical prediction of the unified theory of inequality and growth, according to which the growth effect of inequality becomes insignificant in the latest stages of economic development that the United States experiences during our period of investigation. Therefore, future policies aiming at moderating the concentration at the upper end of income distribution are not likely to have adverse growth consequences in developed countries such as the United States. (JEL I21, O47, C23)     

“Inequality in Work Time: Gender and Class Stratify Hours and Schedules,Flexibility, and Unpredictability in Jobs and Families”

Work time is deeply stratified by gender and class. In this review, we first summarize the research discussing the number of hours that people work, the scheduling or timing of those hours as well as the flexibility and unpredictability of work time, discussing the ways all three are stratified. Second, we examine research on the ways work time is mandated, negotiated and contested. This part focuses on the processes, institutions and relations that explain inequality in hours and schedules—beginning with a discussion of relations at the work place, then turning to relations outside the workplace, especially family dynamics, and finally examining policies and politics about work time.     

Inequality and education decisions in developing countries

In this paper we analyze the effect of inequality on school enrollment, preferred tax rate and expenditure per student in developing countries; when parents can choose between child labor, public schooling or private schooling. We present a model in which parents make schooling decisions for their children, weighing the utility benefit of having a child with formal public or private education versus the forgone income from child labor or household work. Parents vote over the preferred tax rate to finance freely provided public education. The utility benefit of an educated child is proportional to expenditure per student, so that there is congestion in public school. We find that when parents can send their children to work or to private school, high inequality leads to exit from public education at both ends of the income distribution. Thus high inequality reduces the support for public education, leading to a low tax rate and expenditure per student. Exit from public education results in both high child labor and a large fraction of students attending private school. In fact there is a threshold level of inequality above which there is no longer support for public education. In addition we explore the implications for the design of foreign aid. The results suggest that foreign aid policies should focus on promoting school attendance rather than increasing school resources, as the later policy might be offset by a reduction in the recipient country’s fiscal effort, with little impact on outcomes.      

THE WELFARE EFFECTS OF TEMPORARY TAX CUTS AND SUBSIDIES: THEORY,ESTIMATION, AND APPLICATIONS

This article presents a tractable and intuitive theory on the welfare effects of temporary tax cuts and subsidies, fiscal policies that I generically term “holidays.” The Kaldor–Hicks efficiency effects are theoretically ambiguous, with competing pro‐ and anti‐efficiency effects on newly incentivized versus time‐shifted purchases. To rectify this ambiguity I derive expressions for the welfare effects that are consistent with constant elasticity assumptions and depend only upon readily and reliably observed information. To demonstrate the framework's broad applicability, I analyze two different policies: the 2009 Cash for Clunkers program and states' sales tax holidays. I estimate that both policies generated substantial deadweight loss. (JEL H21, H30, D91)     

Poverty, inequality, and populist politics in Iran

Despite nearly three decades of revolutionary government rule, poverty and inequality remain the central issues of political debate in Iran. The unexpected electoral victory of Ahmadinejad, the populist candidate in the 2005 presidential election, has been widely attributed to rising poverty and inequity. Using household survey data, I examine the trends in poverty and inequality for the last three decades and show that this thesis is not grounded in facts. Survey data show that poverty has substantially declined in recent years, and is low by international standards and in comparison with pre-revolution years. This finding is consistent with pro-poor policies of the Islamic government, mainly in provision of basic infrastructure such as electricity, safe drinking water, and health. However, the same policies have not been as effective in reducing inequality, which, after an initial decline following the Revolution, has remained basically constant in the post-Revolution period. An earlier version of this paper was presented at the Third Annual World Bank Conference on Inequality, Washington, DC, June 5–6, 2006. I wish to thank for comments Francisco Ferreira, Hojat Ghandi, Farrukh Iqbal, Essie Maassoumi, Branko Milanovic, Javad Shirazi, Vijayendra Rao, and two anonymous referees. For able research assistance I am grateful to Ali Hashemi and Marenglen Marku, and for access to survey data to the Statistical Center of Iran. All errors are mine.     

Making Policymakers More Gender Aware: Experiences and Reflections from the Women's Budget Group in the United Kingdom

SUMMARY

The UK Women's Budget Group (WBG) is a think tank focusing on the gender implications of economic policy that attempts to influence UK government policy to be more gender aware and adopt policies that decrease gender inequality. The WBG has had the overarching aim of encouraging the government to take account of gender in policy formation and to monitor and hold itself accountable for the gender effects of its policies. At the same time the WBG has advised the government on the gender effects of particular policies and proposed modifications to make policies more supportive of (or less harmful to) women, and poor women in particular. Such advice has covered a number of areas, including fiscal policy, tax credits, income support, financial support for children, childcare policy, maternity and parental leave, work-life balance policies, pensions, pay equity, training and productivity, the use of indicators and the collection of government statistics. While the government has been keen to acknowledge the WBG's influence on certain policies, in other areas the WBG has had no discernible effect on policy. This analysis focuses on several common gender issues, including taking account of gendered life-courses, intra- as well as inter-household gender inequalities, valuing and remunerating care and accounting for unpaid work, to assess the WBG's impact and possible reasons for success or failure.     

Child labour and inequality

This paper focuses on the role that inequality plays in shaping political support for child labour regulation policies. We provide a model of the evolution of child labour, fertility and human capital where the heterogeneity between low- and high-skilled workers allows for an endogenous analysis of inequality generated by child labour. Depending on the initial level of inequality, child labour regulation policies can affect the welfare of low- and high-skilled workers in different ways and therefore can have an impact on political support for their introduction. The possible conflicts of interest that may arise between the two groups can help explain the difficulties that many governments have when dealing with the issue of child labour.     

The Politics of Regional Inequality in Ghana: State Elites,Donors and PRSPs

Through an analysis of Ghana's HIPC Fund which was established as part of the PRSP process, this article shows how aid‐financed efforts to reduce regional inequality in Ghana have failed. Dominant political elites agreed to policies reducing regional inequality in order to have access to aid funding but, once approved, these funds were allocated on quite different criteria in ways that marginalised the poorest. This analysis reinforces the growing recognition that developmental outcomes in most poor countries are shaped not so much by the design of ‘good’ policies per se, but more importantly by the power relationships within which policy‐implementing institutions are embedded. Aid donors seem unable to grasp this important lesson fully, and so their capacity to contribute to reducing regional inequality remains limited.     

Inequality,integration, and policy: issues and evidence from EMU

Simple theoretical arguments imply that while economic integration may or may not increase income inequality and volatility, it certainly makes it difficult for National governments to conduct independent fiscal policies and to enforce income redistribution schemes. Controlling for country-level income variation, available data suggest that Europe’s Economic and Monetary Union (EMU) was associated with a small but significant increase in disposable income inequality, and that this was in turn accounted for by less generous social policies.     

The Impact of Uruguay's 2007 Tax Reform on Equity and Efficiency

In 2007, the Uruguayan government implemented a tax reform which introduced a new progressive labour income tax and a flat capital income tax, and reduced some indirect taxes, with the objective of improving fiscal balance, income distribution and economic growth. This article evaluates the impact of such tax reform on equity and efficiency on the basis of data derived from the Encuesta Continua de Hogares (ECH) for 2006 and 2009. Using a Difference‐in‐Differences technique, it shows that the new system reduced inequality by 2 Gini points without producing any discernible disincentive effect, suggesting that suitably designed reforms of direct taxation can simultaneously promote equity and efficiency.     

BUSINESS RESOURCES AND TAXATION: A CROSS-SECTIONAL EXAMINATION OF THE RELATIONSHIP BETWEEN ECONOMIC ORGANIZATION AND PUBLIC POLICY

Many writers have speculated about the connection between economic resources of corporations and their ability to dominate politics in democratic societies with advanced capitalist economies. Using a cross-sectional analysis of business taxes in the American states, this study examines the political impact of four economic resources that are plausibly related to heightened business political influence. With seven factors held constant, I find that states with larger enterprises are most likely to have lower taxes on manufacturing, but concentrated sales do not have any effect on these taxes. The degree to which the organizational efforts of firms are handicapped because industry products are diverse also has an independent relationship with state and local taxes paid by manufacturers, but this relationship does not hold when the least industrial states are excluded from the equations. I also find that where competition between political parties is most intense, tax policies will be less likely to favor business interests. It follows that the evidence in this study is consistent with a hypothesis that firms can translate their formidable economic resources into political influence at the state and local level.